introduction to decision support system

Unit VUnit VDecision Support SystemsDecision Support Systems

Coverage : Decision Support Systems (DSS)Coverage : Decision Support Systems (DSS)

Concept and philosophy, Concept and philosophy, Using Decision Support systemsUsing Decision Support systemsWhat-if analysis, sensitivity analysis, Goal-seeking analysis, What-if analysis, sensitivity analysis, Goal-seeking analysis, Optimization analysis. Optimization analysis. Introduction to Data Warehouse: Introduction to Data Warehouse: Architecture, Organization and Management of Data Warehouse, Implementation,

Data Mining for Decision support, Data Mining for Decision support, Executive Information systems, Executive Information systems, Enterprise Information portal and knowledge management Enterprise Information portal and knowledge management systems, systems, Introduction to Artificial Intelligent Systems, Knowledge Based Introduction to Artificial Intelligent Systems, Knowledge Based Expert systems, GISExpert systems, GIS

Business and Decision SupportBusiness and Decision Support

To succeed, companies need information To succeed, companies need information systems that can support the diverse systems that can support the diverse information and decision-making needs of information and decision-making needs of their managers and business professionals.their managers and business professionals.

Business and Decision Support (continued)Business and Decision Support (continued)

Information, Decisions, & ManagementInformation, Decisions, & Management

The type of information required by decision makers is directly related to the level of management and the amount of structure in the decision situations.

Business and Decision Support (continued)Business and Decision Support (continued)

e-Business Decision Support Applicationse-Business Decision Support Applications

CustomerRelationshipManagement

Situation: What-ifScenario Analysis

Supply ChainManagement

Knowledge/InnovationManagement

Enterprise PerformanceMonitoring

Employee-Manager/Customer/Partner

Type of decisionsType of decisions

Structured decisions (Programmed Decision)Structured decisions (Programmed Decision) It involve definite procedures and are not

necessarily very complex. They follow predetermined set of rules. These decisions are often repetitive and routine in

nature. The choice phase of programmed decision follows

the condition and rules for action. Some times this process is also called as “If-Then-Else” process

Unstructured Decision (Non-Programmed Unstructured Decision (Non-Programmed Decision)Decision) The decision in a business organization also

involve situation were predefined reaction to situation cannot be specified.

Such decision cannot be made on the predefined rules.

There are no standard sets of rules that can be followed.

The choice stage depends on variety of factors.

Business and Decision SupportBusiness and Decision Support

Semi structured decisions Semi structured decisions Some decision procedures can be specified in advance,

but not enough to lead to a definite recommended decision

Only part of decision has clear-cut answers provided by accepted procedures

Examples: Allocate resources to managers; develop a marketing plan

• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

• Group Decision-Support Systems (GDSS)

Systems for Decision SupportSystems for Decision Support

There are four kinds of systems that support the different levels and types of decisions:

Stages of Decision-Making (Phases)Stages of Decision-Making (Phases)

Herbert A. Simon model “The New Science of Herbert A. Simon model “The New Science of Management Decision” Management Decision”

Simon’s model of decision-makingSimon’s model of decision-making

Three inter-related phases. Three inter-related phases.

The three phases are inter-related as there is a The three phases are inter-related as there is a flow of activities from the Intelligence phase, flow of activities from the Intelligence phase, to the design phase to the choice phase. to the design phase to the choice phase.

Stages in Decision Making

Let's use the example of purchasing a new Let's use the example of purchasing a new television :television :

Intelligence :Intelligence : You identify the facts: You You identify the facts: You don't have a television or the one that you do don't have a television or the one that you do have isn't any good. You intuitively have isn't any good. You intuitively understand what the problem is and its effect understand what the problem is and its effect on you. You missed your favorite show last on you. You missed your favorite show last night. night.

Design : Design : You design possible solutions: You You design possible solutions: You could watch the television in your neighbor's could watch the television in your neighbor's apartment or you could purchase a new one for apartment or you could purchase a new one for yourself. Your neighbor will get annoyed if yourself. Your neighbor will get annoyed if you keep coming over. On the other hand, you you keep coming over. On the other hand, you won't be able to go on vacation if you use your won't be able to go on vacation if you use your money to buy a new television. money to buy a new television.

Choice :Choice : You gather data that helps you make You gather data that helps you make a better decision: Your neighbor doesn't like a better decision: Your neighbor doesn't like the same shows you like or she's getting rather the same shows you like or she's getting rather tired of you being there. You also determine tired of you being there. You also determine that televisions cost a lot of money so you that televisions cost a lot of money so you figure out how you can afford one. You figure out how you can afford one. You choose to purchase a new television instead of choose to purchase a new television instead of watching your neighbor's. watching your neighbor's.

Implementation :Implementation : You implement the You implement the decision: You stop at the appliance store on decision: You stop at the appliance store on your way home from work and carry out your your way home from work and carry out your decision to purchase a new television.decision to purchase a new television.

Decision Support SystemsDecision Support Systems

What If-AnalysisWhat If-Analysis

Sensitivity AnalysisSensitivity Analysis

Goal-Seeking AnalysisGoal-Seeking Analysis

Optimization AnalysisOptimization Analysis

ImportantDecision SupportSystemsAnalytical Models

ImportantDecision SupportSystemsAnalytical Models

Using Decision Support SystemsUsing Decision Support Systems

An interactive modeling processAn interactive modeling process

Four types of analytical modelingFour types of analytical modeling What-if analysis Sensitivity analysis Goal-seeking analysis Optimization analysis

Using Decision Support Systems (continued)Using Decision Support Systems (continued)

What-If AnalysisWhat-If Analysis End user makes changes to variables, or

relationships among variables, and observes the resulting changes in the values of other variables

What-If Analysis

Using Decision Support Systems (continued)Using Decision Support Systems (continued)

Sensitivity AnalysisSensitivity Analysis A special case of what-if analysis The value of only one variable is changed

repeatedly, and the resulting changes on other variables are observed

Typically used when there is uncertainty about the assumptions made in estimating the value of certain key variables

Sensitivity Analysis

Figure 13-5

Using Decision Support Systems (continued)Using Decision Support Systems (continued)

Goal-Seeking AnalysisGoal-Seeking Analysis Instead of observing how changes in a variable

affect other variables, goal-seeking sets a target value (a goal) for a variable, then repeatedly changes other variables until the target value is achieved

Goal Seeking Analysis

Using Decision Support Systems (continued)Using Decision Support Systems (continued)

Optimization AnalysisOptimization Analysis A more complex extension of goal-seeking The goal is to find the optimum value for one or

more target variables, given certain constraints